Directors' Report 2021

--- title: Directors' Report 2021 subtitle: author: Trident Garages Ltd date: 22nd September 2022 toc: true --- # KEY EVENTS ## ElectricBrands agency In January 2021, the directors signed an agency agreement with ElectricBrands, to sell its XBUS electric modular bus from our new *The Old Forge* site in Ottershaw. The directors have set up a new website at www.tridentxbus.co.uk. ## Third COVID-19 lockdown On 6th January the UK entered into its third national lockdown, which continued until Monday, 12th April. As with the second lockdown, our Shell filling station and Honda workshop were able to continue trading as 'essential services', whilst our Honda showroom closed, with car sales operating on a click and collect basis. ## Electric Vehicle accreditation In March 2021, the Company was awarded its Electric Vehicle Approved (EVA) accreditation. The EVA scheme has been developed by the National Franchised Dealers Association (NFDA) to recognise retailers' excellence in the electric vehicle sector. EVA is endorsed by the Government's Office for Zero Emission Vehicles (OZEV) and the Energy Saving Trust. ## Launch of the Honda HR-V e:HEV The all-new Honda HR-V e:HEV was launched in quarter 2 2021. Using Honda's new e:HEV 'full hybrid' powertrain, the new model offers much improved economy and emissions over the outgoing model. The new HR-V was exceptionally well received by customers; although limited supply meant that only 9 retail units were sold during the remainder of the year. A further 26 units were sold in the first quarter of 2022 alone - more than were sold in the whole of the past three years. ## Introduction of Shell E10 petrol On 4th September, our Shell filling station transitioned from E5 to E10 Ethanol-based fuel. Other than some consumer confusion, this change has caused few issues. ## Run-out of the Honda Civic 2021 was the last year for the outgoing Honda Civic, with the final orders being taken in quarter 3. Honda has revealed the replacement Civic e:HEV Hybrid, but its launch is not planned until quarter 3 2022. Whilst this does leave a gap in our product range, sales of the Civic never recovered after lockdown, and so this will not have any significant additional impact. The directors are looking forward to the reemergence of the Civic in 2022. # REVIEW OF BUSINESS ## Car Sales With our Honda showroom closed for most of quarter 1, it is not surprising that our car sales were 25% down on the same period in 2019, resulting in a small loss for the sales department for quarter 1. This all changed after lockdown, with new car sales up an astonishing 113% and used car sales up 30%. This resulted in a 3-4% return on sales for the remainder of the year, helped by a 36% jump in new car margins in the final quarter as supply chain issues began to restrict supply. In the first two quarters we were more reliant on used sales, with a used:new ratio of 2.9:1 and 2.6:1 respectively. This dropped to 1.6:1 and 1.7:1 in the third and fourth quarters, as consumers began to be put off by the higher used car pricing. Used margins were up 24%, but units were significantly down. ## Aftersales Despite remaining open through the third lockdown, our service and parts departments were nonetheless impacted by a decline in demand, as some customers chose to wait for lockdown to end before completing their routine maintenance. This was exacerbated by the complete closure during the first lockdown of 2020, which postponed customers' annual maintenance cycle by a couple of months. We were able to balance our staffing costs with this reduction in demand, by use of the Coronavirus Job Retention Scheme (CJRS). The CJRS closed in April 2021, with the result that profitability in quarter 2 fell by 27%. Customer demand and profitability improved for quarter 3, with sold hours up 26% and profitability up 54%, and we achieved a 36.5% return on sales for the year, marginally up on 2019, but on slightly reduced volumes. ## Forecourt January to April were naturally badly affected by the lockdown, but volumes improved by 39% once the lockdown was lifted. Quarters 3 and 4 still only achieved 1.5m and 1.3m litres respectively, compared to 1.6m and 1.5m in 2019, which we attribute to the effects of working from home, improvements in vehicle fuel efficiency and the increasing sales of electric vehicles. ## Overall Overheads and departmental expenses were helped in the first four months of the year by the CJRS, enabling a surprisingly good 1.8% in quarter 1. Return on sales rose to 2.8% and 3.5% in quarters 2 and 3, before declining in quarter 4 to 1.9%, due to the usual seasonal effect. # FUTURE DEVELOPMENTS ## Honda Honda has been far less affected by supply chain issues than most manufacturers, with few problems prior to quarter 4 2021. Any impact has been offset by the resulting improvement in new car margins, and this is expected to continue into 2022. The run-out of the Honda Civic has left us one model short in our range, but expectations for the replacement Honda Civic e:HEV are high, with a promise of further additions to the range in 2023, including a new SUV. Whilst Honda's vehicle PARC has declined in recent years, its retention products and customer profile have meant that a higher proportion of business has been retained by the dealership, than would likely have been the case with another brand. The Company also enjoys a much enlarged Honda territory, after the closures of Bracknell Honda and Thames Ditton Honda. ## ElectricBrands In April 2022, ElectricBrands became the exclusive distributor of the escooters and ebikes of the Italian company NITO bikes. In May 2022, ElectricBrands acquired electric car company *Artega*, resulting in the addition of their KARO electric car, renamed *Evetta*. Nito Bikes are expected to arrive late in 2022, the Evetta in quarter 2 2023, and the XBUS in quarter 1 2024. ## Shell We have now renewed our contract with Shell for a further five years, commencing 1st November 2022. Shell also owns the filling station opposite, that being our principal competition for fuel and shop sales. Shell announced that it would be redeveloping the site as a *Little Waitrose* operation during 2022, resulting in a closure of seven months. Once the site re-opens, our shop will face stronger competition; however we still hold the prime location, being on the side of the road heading towards the M25, and such combined supermarket operations typically deliver a slower service, which is likely to drive those customers desiring a quicker service to our forecourt. In the meantime, we have taken the following steps to improve our offering: * In quarter 1 2022, we renovated our forecourt shop, including new flooring, shop fittings, chillers and freezer. * In quarter 2 2022, we invested in new Tokheim Quantium fuel dispensers, taking the opportunity to change our pipework to enable all-grades to all dispensers. This enabled us to switch one of our tanks to double our diesel capacity. These changes should dramatically reduce the occasions that we run out of diesel, whilst the new dispensers should cope far better with the new biofuels, resulting in fewer outages. Lastly, having all grades to all pumps should result in less queuing for customers. ## Queensmead (Weybridge) Ltd Queensmead is a joint venture between the majority of the shareholders of Trident Garages Ltd and Cleanslate Ltd and was originally incorporated for the purpose of developing the dealership site at 30 Queens Road, Weybridge for a mix of residential and retail. Queensmead continues to owe Trident £2.25m for the remaining balance of their purchase of the Weybridge site. Payment of this remaining balance has been given legal priority -- after development funding, but before the developer's management fee and profit distribution. A softening of the sales market for apartments after lockdown has led the directors to transfer eleven of the remaining apartments into a wholly owned subsidiary business, with the intention of taking advantage of the burgeoning rental market. The directors are pleased to report that all apartments were swiftly rented with excellent yields. This has left four apartments in the parent company, of which two are proceeding to exchange of contracts, and the other two available for sale. Once these and the groundrent have been sold, the developer funding should be cleared and the company can enjoy the proceeds of the rentals, whilst waiting for the sales market to return. With these changes in place, the directors continue to believe that there is little risk of a default on this debt, but do recognise that payment of this debt may now be delayed some years. ## Fairoaks Garden Village There continues to be a plan in place to develop nearby Fairoaks Airport for residential property. This plan includes significant changes to local roads, which are likely to negatively impact upon the business. The directors hope that any such impact will be offset by future business from the new residents and the increased volume of passing traffic. ## Energy costs Following Russia's invasion of Ukraine, the wholesale gas and electricity prices have increased substantially. Our energy costs were fixed until September 2022, protecting the Company from the immediate impact of this price escalation. ## Staffing The Company enjoys excellent staff retention, which has largely isolated it from the staff shortages being experienced elsewhere. ## Pandemic There remains an ongoing risk of COVID-19. The government seems determined that there should be no further lockdowns, but in the event that there are, we believe that we now have an effective method of trading - by staying open for essential services and operating on a click-and-collect basis for car sales; however this would be financially challenging, in the absence of a new Coronavirus Job Retention Scheme. ## Conclusion The Honda product is rapidly improving, with exciting new models in the pipeline, and the Company is well placed to benefit, with a newly enlarged territory and located in an affluent area. The ElectricBrands agency offers an exciting future for our *The Old Forge* site, with a customer base that is likely to be very different from our Honda customers, and product that is very different from Honda's. Given all the above and our recently refurbished premises, stable workforce, and excellent local reputation, the directors remain confident in the Company's future, in spite of the ongoing economic uncertainty.